Whether it's back-to-school or specialty foods, there are many core segments supermarkets can target as destination departments to get consumers to shop their stores first.
umers and what they buy better. Use of this data will aid retailers in deciding if they should devote significant space to the destination concept, or to have a limited representative selection as a convenience to customers.
"If you look at the consumer who shops your store, there are certain categories I might not even want to have a large representation in my store. The consumer sets the tone for the entire store strategy," said Paul Musico, manager of strategy and support at Chesebrough-Pond's, Greenwich, Conn.
"The beauty of the food business is that you've got those customers within the store," he added.
Roundtable participants discussed back-to-school and specialty food as destinations.
SN: There seem to be opportunities for supermarkets to create destination departments so shoppers go to their stores first for certain items. One area mentioned is general merchandise as it relates to school and home office supplies. Are supermarkets implementing this strategy?
PURIGRASKI: There's a big opportunity for supermarkets to do it, but frankly there are few chains attempting to make stationery a destination. You need more space than a lot of the grocery chains are willing to devote. You have to be willing to put up at least 24 feet in school supplies.
The opportunities are there, especially for year-round business. At back-to-school, the mass retailers are out running very low prices or the margin opportunities aren't necessarily there. But once you get past back-to-school, there is a terrific opportunity for both grocery and drug chains to do a year-round business. Mass really promotes only a couple of items.
SN: What type of product mix are supermarkets focusing on?
PURIGRASKI: The trend is more toward value-added merchandise. Our 5-Star themed books -- the nylon products -- are higher priced and discounters don't discount these too much. This allows for tremendous growth margin. We think more grocery chains are recognizing this opportunity. Yet, it means they have to allocate space to it.
Another issue with stationery is that it's probably one of the more difficult departments to manage as far as neatness is concerned. If you're successful, it's a mess because kids will shop it and not put items back in the right place. It takes a lot more maintenance to run a stationery department. But there's probably more opportunity in this category than many other areas of the store if you're willing to devote the energy and the time. That means a real commitment from top management and store personnel. But on a year-round basis it's an opportunity in grocery chains that's waiting to happen.
SN: How about the retailers? What's been your experience with stationery items?
SHOOLTZ: If it isn't taken care of properly, it will be an orphan in your store. But it's a good category in our stores. That department covers about 5% to 6% of our nonfood sales. We try to have anywhere from 12 to 16 feet for the category. So for a small-size grocery, it's a good contributor.
HIGHSMITH: I don't know that we'll ever be a destination in that area. However, stationery is one area we are going to change in our 100 stores. We're devoting anywhere from 24 to 48 feet for stationery and it's growing. Pet is another area we are changing.
With enough commitment you can make anything a destination category, if you really want it bad enough. I don't know if we'll do that. But we'll improve it greatly from where it is now. Expanding stationery and pet supplies is very important to us.
SIGEL: The whole concept of destination is an issue of space, obviously. It's also a merchandising philosophy. It's having to make a decision between having a destination category vs. a representation category. In nonfood, we carry thousands and thousands of items. Traditionally, we've put the representation of those items into the supermarket.
We think it's time that supermarkets take a different view and make some tough decisions. Maybe their stores should not represent all categories. Perhaps we should concede some categories and expand those categories we're trying to focus on as a destination. There are enough core categories within key sections that we can begin regaining some share.
MUSICO: If you look at the consumer who shops your store, there are certain categories I might not even want to have a large representation in my store. I keep going back to the consumer who sets the tone for my entire store strategy.
From the manufacturers' side, we can help identify those consumers and be a source that will help retailers determine whether this is a good destination category for them. You have to look at the situations in the areas you're retailing in. It's really become a technical science. I'm not sure we take advantage of all the resources available to us.
SIGEL: It could well be that a lot of these decisions become individual store-based -- demographic, micromarketing.
MUSICO: That's the challenge. I think if we could get our arms around it, we'll wind up selling products and outlets that maybe we really haven't been in before and haven't gotten to consumers before. The beauty of the food business is that you've got those customers within the store.
SN: Back-to-school promotions now begin in many parts of the country on July 1. Is this activity changing?
PURIGRASKI: Seasonally back-to-school has always been about the same. It's starting earlier. But sales are happening later.
But the products have changed. More value-added products are being promoted whereas commodities used to be the big promotional items. In the old days, you had to sell lot of envelopes, portfolios and filler paper and when you were done you found you sold a lot of units, but didn't make that much profit. So there is lot of opportunity for higher-skilled merchandise and grocery will get into those products a lot faster than they have in the past.
Your going to see more fashion, more nylon and upscale products with high price points. There is a lot less attention being paid to the filler paper -- the commodity low-end market.
In grocery stores, there are more expanded departments. Supermarkets are getting more aggressive in outposting.
As the products have changed, we have gotten better at display vehicles also. As we sell more value-added products, we can afford to spend more money on displays. That trend will continue in the future.
HIGHSMITH: The advent of credit in supermarkets has helped it, too. Seasonal is big with us. We have seasonal sections in every store. We do relate to the seasons. We don't try to be a Wal-Mart. We put in what we think are the key items. What I've found in my past experience is that accepting credit/debit cards allows you to go to a higher price-point item.
PURIGRASKI: It's also important to send a signal to your shoppers that your in this category year-round.
If you don't have outposts, or haven't done anything to set the section apart, customers aren't going to come to you to make their year-round purchases. So it's really important to ingrain in the consumer's mind that your in the home-office supply or back-to-school business. So when they think about going out and buying something later in year, your store will be in the top of their minds.
HIGHSMITH: That is one reason to put merchandise out early, too. Whether you sell it or not, it let's people know you have products available.
SN: Are there destination departments in Dierbergs?
WIKOFF: In our newest store, opened in January, we've tried a new approach in specialty foods. We actually have a 4- to 8-foot specialty section in virtually every aisle in the grocery department. Black metro shelving [for specialty foods] contrasts to the ivory shelving throughout the store. We have specialty signs.
Putting these specialty products together is getting customer attention, especially on an item like mustard. That item gets lost with all the other mustards. But when you have a 4-foot department of all the various specialty mustards, it now gets shopper attention. We think we'll take that concept to other stores.
We're creating a destination category for people who want those specialty items and can't find them in every store. It gives shoppers a reason to come to your store -- specifically because you have that certain unique item. That's our latest approach in trying to create a destination category without a major pricing strategy. It's having that variety and letting people know about it.